Dodds-RoundhillCoal Gasification Project

PUBLIC DISCLOSURE DOCUMENT

January 2007

Carbon Development Partnership

DODDS-ROUNDHILL COAL GASIFICATION PROJECT Public Disclosure Document

Table of Contents

Senior Vice President’s Message

1.0 Project Overview 2.0 Project Need & Benefits

3.0 Project Proponent

4.0 Project Location & Setting 5.0 Geology and Resource Potential

History of Resource Development in the Area Resource Delineation Coal Resource Potential

6.0 Proposed Facilities and Operations

Coal Mining Coal Preparation and Storage Coal Gasification Utilities & Infrastructure

7.0 Project Schedule 8.0 Potential Environmental and Socio-Economic Effects of the Project

Environmental Socio-Economic

9.0 Social and Environmental Responsibility

Sherritt’s Commitment Community and Stakeholder Engagement Environmental and Socio-Economic Impact Assessment

10.0 Contacts Figure 1: Project Location Figure 2: Coal Mining Stages Figure 3: Coal Storage and Handling Figure 4: Overview: Gasification of Coal to Syngas and Hydrogen

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Senior Vice President’s Message Alberta has been endowed with an abundance of energy resources and has demonstrated its ability to allow these resources to be developed in a safe, economic and environmentally responsible manner. Alberta is also recognized for the ingenuity of its people, as demonstrated by their ability to employ new, leading edge technologies to develop what were previously untapped resources, such as heavy oils and bitumen from the oil sands. Of its vast energy reserves, Alberta’s coal remains its least utilized resource. Alberta has over 33 billion tonnes of coal which, at current consumption rates, represents several hundred years of supply. While coal is a major source of fuel for the generation of electricity in Alberta, it is used for little else, despite its huge potential. By processing coal to produce synthesis gas (syngas) and hydrogen, the Dodds-Roundhill Coal Gasification Project is designed to provide Alberta with a new source of economic and environmentally sustainable energy, further enhancing Alberta’s reputation as the premier energy supplier in North America. The Dodds-Roundhill Coal Gasification Project represents a key step towards Alberta’s future as a global centre of excellence in innovative “clean coal technology.” Such technology can lead to a critical mass of jobs and intellectual capital with tremendous export potential. This new technology will help preserve natural gas resources for higher value uses and unlock the full energy potential of coal. This new energy source can support the development of Alberta’s vast oil sands resources in an environmentally sustainable manner. This Public Disclosure Document outlines our development plans for the Dodds-Roundhill Coal Gasification Project and is a first step in the creation of an ongoing dialogue with all of the stakeholders in this exciting project. Your involvement is critical if we are to accomplish our goal of creating a world-class source of environmentally sustainable energy. We are committed to listening to you and to doing our best to ensure that your questions are understood, respected and addressed. Sherritt prides itself in being a good neighbour in the communities where it operates and we encourage and appreciate your participation in the public consultation process of the Dodds-Roundhill Coal Gasification Project. Sincerely yours,

Barry Hatt Senior Vice President Sherritt International Corporation

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DODDS-ROUNDHILL COAL GASIFICATION PROJECT 1.0 Project Overview Carbon Development Partnership, by its agent Sherritt International Corporation (Sherritt) is proposing Canada’s first commercial application of coal gasification technology, the Dodds-Roundhill Coal Gasification Project (the Project). Sherritt and the Ontario Teachers’ Pension Plan are partners in Carbon Development Partnership (CDP). One of the mandates of this partnership is to develop new, innovative uses for its coal resources in Western Canada. Sherritt believes that proven coal gasification technology will help optimize the utilization of Alberta’s abundant and economic coal resources. Production from coal gasification can also act as a replacement to high value natural gas currently being used to upgrade bitumen, ensuring sustained long-term growth of the energy economy in Alberta. Subject to the outcome of environmental, economic and engineering evaluations, Sherritt plans to build a surface coal mine and a coal gasification facility that will process coal feedstock to produce synthesis gas (syngas). The syngas can be used for fuel, as a petrochemical feedstock or can be further processed into high purity hydrogen. Syngas and hydrogen can be used by bitumen upgraders and petrochemical refineries or for in-situ heavy oil recovery in Alberta. If economic, syngas can also be further processed into synthetic natural gas to supplement Alberta’s valuable natural gas resources. By-products from the gasification process include elemental sulphur and carbon dioxide; both of which can be easily captured and have commercial value in potential regional markets. The Project will be developed using a phased approach, initially consisting of a single gasification unit and a mine large enough to support two gasification units. Once the first unit is operational, a second gasification unit of the same capacity as the first will be considered for development. Sherritt’s long-range plans include, if feasible, two more (the third and fourth) similarly-sized gasification units which will require a corresponding increase in the mine permit area. Further environmental studies and approvals would be required for the third and fourth units. Additional infrastructure requirements of the Project are anticipated to include: • a raw water pipeline and an associated water intake; • one or more dedicated product pipelines to the market place (most likely

Alberta’s Industrial Heartland Region around Fort Saskatchewan); and • a pipeline to carry CO2 either to market, possibly for enhanced oil recovery

(EOR), or to safe underground storage (sequestration).

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The Project, if approved, would: • require an investment anticipated to be C$1.5 billion; and • target customers, including hydrogen consumers in the Industrial Heartland

region as the primary market. The Project schedule assumes: • submission of the Project application to government in early 2008; • receipt of government approvals in early to mid 2009; and • plant startup in 2011.

2.0 Project Need & Benefits Project Need The development of Alberta’s vast oil sands resource has resulted in increased demands for natural gas to produce steam for bitumen recovery and as a source of hydrogen for bitumen upgrading. However, using increasing volumes of natural gas to process relatively low energy/high carbon resources such as bitumen is costly and is not sustainable. Sherritt believes that unlocking the full energy potential of coal, in an environmentally responsible manner, is a key next step in the ongoing and sustainable development of Alberta’s oil sands. These benefits transcend the oil sands industry and also offer important advantages to a range of other Alberta industries that currently use natural gas as a feedstock or energy source. Canada is ranked tenth in the world in coal reserves and Alberta’s 33.6 billion tonnes of coal represent 70 per cent of Canada’s reserves. As a result, Alberta’s coal resources constitute an enormous source of untapped energy. The production of syngas through coal gasification provides alternatives to the use of natural gas to produce steam and hydrogen for bitumen extraction and upgrading. This in turn will allow Alberta natural gas reserves to be preserved for domestic consumption, for export as a fuel and for higher value-added uses such as a feedstock for the petrochemical industry.

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Project Benefits In addition to offering Alberta a new, financially stable and sustainable source of energy and hydrogen, the proposed Dodds-Roundhill Coal Gasification Project is anticipated to provide local, regional and national economic benefits. Based on construction employment of like-sized petrochemical facilities in Alberta, the Project is expected to require up to 1,000 construction workers during the construction phase. Full-time employment in the plant and mine operations is anticipated to be up to 300 employees for the first gasification unit, and may be considerably higher once the second gasification unit is commissioned. In addition to direct employment, the Project is anticipated to provide the following benefits: • As Canada’s first commercial coal gasification project, the project will

enhance Alberta’s overall economic position as a world-scale supplier of stable, clean, and sustainable energy products;

• By optimizing the integrated utilization of Alberta’s coal and bitumen

resources, the Project will also help to ensure the sustained long term growth of the energy economy in Alberta;

• Local, regional and provincial contractors and retailers will receive benefits by

providing goods and services to the Project. • Municipal, Provincial and Federal Governments will benefit through the

receipt of revenue in the form of production royalties, license fees and taxes: In addition to the above economic benefits, the “clean coal technology” of coal gasification offers the potential to significantly reduce the emissions that have historically resulted from the use of coal to produce energy. In particular, the gasification process produces a concentrated stream of carbon dioxide that can be captured for sequestration or other uses such as enhanced oil recovery. Impurities in the coal (such as sulphur) are more readily removed through the controlled process of gasification than when the coal is burned directly. Syngas from coal gasification also burns more cleanly than coal.

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3.0 Project Proponent Sherritt International Corporation The Dodds-Roundhill Coal Gasification Project will be managed and operated by Sherritt International Corporation. The coal feedstock for the gasifier is owned by Carbon Development Partnership (CDP), a 50/50 partnership between Sherritt and the Ontario Teachers’ Pension Plan. CDP owns or has the rights to approximately 12 billion tonnes of economically mineable coal located in the provinces of Alberta, British Columbia and Saskatchewan. Sherritt is a diversified natural resource company that operates in Canada and internationally. Sherritt directly and through its subsidiaries, has interests in thermal coal production; nickel and cobalt mining, processing and refining; oil and gas exploration, development and production; and electricity generation. Sherritt’s Alberta operations consist of five coal mines dedicated to power generation facilities (Prairie Mines & Royalty Limited), one coal mine for domestic and export sales of thermal coal (Coal Valley Resources Inc.), and a metals refinery producing high purity nickel and cobalt for sale in both domestic and export markets (Cobalt Refinery Co. Ltd). Sherritt’s thermal coal operations, which have been mining coal in Canada since 1911, currently have a combined production capacity of over 40 million tonnes annually from surface mining operations in Alberta and Saskatchewan. Sherritt’s coal operations have a workforce of about 1,700 and have established a reputation for running safe, efficient and environmentally responsible operations. A focus on worker safety and union/management cooperation has resulted in a record number of hours worked without a lost time incident. In 2006, Sherritt received the Best Safety Performer Award from Work Safe Alberta. Through research and innovation, Sherritt is constantly seeking ways to minimize the impact of its operations on the environment, including steadily improving techniques to accelerate land reclamation after mining has been completed. Sherritt coal operations were honoured at the 2006 Alberta Chamber of Resources’ Annual Awards Banquet for outstanding reclamation work at Lovett and Silkstone Lakes, two reclamation areas at the Coal Valley mine. 4.0 Project Location & Setting The Project will be located approximately 80 kilometres southeast of Edmonton, Alberta just south of the town of Tofield and village of Ryley, and north of the hamlet of Round Hill, Alberta in Township 48 Ranges 17 & 18, Township 49 Ranges 17, 18 & 19 and Township 50 Ranges 18 & 19 all West of the Fourth Meridian (Figure 1).

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The Project will require sufficient land to support the construction and operation of a surface coal mine, a coal preparation plant and the coal gasification plant. Space for a number of ancillary facilities will be needed as well, including coal storage facilities, an oxygen plant, a waste water treatment plant, a raw water pipeline into the site and product pipelines out from the site. The eventual mined area for the Project will be completely enclosed within the Mine Permit boundary (Figure 1). The Mine Permit encompasses an area of approximately 312 square kilometres (31,337 hectares) and contains sufficient coal resources to fuel two gasification units for approximately 40 years. If additional gasification units are deemed feasible, it is anticipated that future mine planning would involve the area south and west of the study area. The Mine Permit area lies predominantly within Beaver County with small sections of the southern boundary within the County of Camrose. The gasifier will be located close to the mine to reduce the coal haul distances. The final plant footprint is likely to be approximately 640 acres (259 hectares) in area and will require the development of suitable access, including possibly rail access. The final site for the gasification plant has not yet been selected and this will be done in consultation with the affected communities and other stakeholders.

Figure 1: Mine Boundary and Proposed Study Area

KE

Tofield

Round Hill

626

854

855

833

834

833

630

617

85414

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Dodds

Poe

Dinant

Haight

Demay

Bardo

Lindbrook

Shonts

Ryley

PROPOSED STUDY AREA

Kingman

5 miles

approximate scale: 8 kilometers

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The proposed mine and plant are located in the Central Parkland Region (Natural Regions Committee 2006)1. Only about 5% of the region is still covered by native vegetation. The dominant landform is undulating glacial till plains with smaller amounts of hummocky or rolling uplands. Wetlands cover about 10% of the region. Remnant native parkland areas within the Central Parkland Region are usually associated with hummocky till or windblown soil materials and contain a mixture of aspen and prairie vegetation. Temperature, precipitation and growing season characteristics are intermediate between the dry, warm grasslands to the south and the cooler, moister boreal forests to the west and north. Black Chernozems are the dominant soils with some Dark Gray Chernozems, and significant occurrences of Solonetzic soils in some areas. Agriculture is the predominant land use within the Project area. Additional land uses include oil and gas production and transmission, a small coal mining operation (Dodds Coal Mining Co. Ltd – see next section), farmsteads and/or country residential acreages, a Ducks Unlimited waterfowl habitat project, and a local recreational area around Black Nugget Lake. Topography within the study region is relatively flat with very little relief and the major water feature in the area is Amisk Creek which flows into Beaverhill Lake. Approximately 99% of the land within the proposed study area is privately owned and primarily used for agriculture. 5.0 Geology and Resource Potential History of Resource Development in the Area There is a significant history of coal mining in the area. There have been a number of small coal mines, both underground and open pit that have operated in the region over the past 90 years. Although most of these coal mines ceased operations during the 1950’s and early 1960’s, the Burnstad surface coal mine operated from 1918 to 1975 and the Dodds coal mine, which began operations in 1909, is still operating. The Dodds coal mine, which is located within the proposed development area, is operated by the Dodds Coal Mining Company Ltd. This coal mine has been a family owned business for the past 50 years and provides coal to a range of domestic markets. The Black Nugget coal mine, which is within the proposed Mine Permit area, operated from 1923 to 1965 and has subsequently been developed as a recreational area. Former mine pits are filled with water and have in the past been stocked with trout. 1 Natural Regions and Sub-regions of Alberta”, Natural Regions Committee 2006, Her Majesty the Queen in Right of Alberta, as represented by the Minister of Environment

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Much of the coal in the area is owned freehold. The ownership of the various undeveloped area coal leases in the past has been scattered among several companies. Luscar Ltd. owned a number of such leases and in 2000, Luscar Ltd. purchased additional coal rights in the area from TransAlta Utilities Ltd. In 2001, Sherritt, in partnership with the Ontario Teachers’ Pension Plan Board, acquired Luscar Ltd. and in 2003 Sherritt and Teachers acquired significant additional coal holdings in the region through a transaction with Fording Coal Ltd. Resource Delineation The region has very significant coal resources (in excess of 500 million tonnes). The Project study area that could supply the initial two phases contains approximately 320 million tonnes of coal, which has been substantiated through extensive geological studies. The existing model of the coal deposit is based on a drilling program2 that was carried out in 1992. Although the existing geological and coal resource data are sufficient to update the geological model and develop the mine plan for the Project, it is anticipated that additional coal resource delineation drilling will be necessary to refine the mine plan and design of the gasification complex. A coal resource delineation drilling program is currently being planned for 2007. Coal Resource Potential The key geological and mining parameters within the proposed mine boundary/study area are: Key Geological and Mining Parameters Coal Resource for initial mine plan approximately 320 million tonnes

Coal Quality sub-bituminous, sulphur content averaging 0.7 percent

Coal Seam Thickness average of two metres, minimum mineable thickness of 0.3 metres

Coal Depth Range less than 6 metres to 40 metres deep within the 40 year life of mine area

Average Overburden Depth approximately 15 metres

Annual Disturbance per Gasification Unit approximately 100 hectares (247 acres)

Mining Rate per Gasification Unit 2.5 - 3 million tonnes (raw coal) per year

Reclamation and Certification Cycle Time approximately 7 to 9 years

2 Luscar Ltd. Dodds-Roundhill Exploration Program (1992)

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6.0 Proposed Facilities and Operations Coal Mining and Reclamation Due to the shallow nature of the coal resources for the Project, the most efficient, safe, and economical method to recover the coal is through surface mining techniques. The proposed surface mine would be composed of a series of parallel open pits, with each pit backfilled by the material removed from the one next to it (see Figure 2). The pits would be developed using a mobile fleet of heavy equipment consisting of draglines, loaders, coal-haul trucks, scrapers and bulldozers. A detailed mine plan, which will set out the locations of each pit on an annual basis over the mine life is currently under development.

Figure 2 – Coal Mining Stages

The steps that will be taken to operate and reclaim the coal mine for the Project include: 1. Prior to mining, all topsoil is removed and stored in stockpiles for future use or

hauled to areas already undergoing reclamation. 2. Suitable subsoil material is recovered and hauled to already mined-out areas

undergoing reclamation.

1 2

3

4

5

6

7 8

9

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3. The dragline removes the overburden (clays and tills) to expose the coal seam(s). The overburden is placed in the adjacent mined-out cut.

4. The dragline lifts the coal out of the cut and stockpiles it on the bench until all of the coal seams are recovered. Coal loading may also occur in the bottom of the pit.

5. The coal is loaded into large-capacity trucks for transport to the gasification complex.

6. Bulldozers contour the replaced overburden, leveling the material to create contours (e.g. hills, valleys, drainage) as desired.

7. Suitable subsoil material is placed after the leveled overburden settles. 8. Topsoil salvaged prior to mining is placed on the leveled subsoil. 9. The land is vegetated and returned to agricultural production or other

acceptable land use as defined in the mines operating licenses. Reclamation starts with the planned storage of topsoil at the start of the mining process and is complete when the land is returned to acceptable land use (steps 1, 2, 7, 8 and 9 above.) Disturbed areas are typically returned to agricultural production within six years and provincially certified as “reclaimed” within nine years. Coal Transport, Preparation and Storage Once mined, the coal will be transported by truck over haul roads from the mine to a storage area at the plant site. All haul roads will be designed to be completely separate from any roads used by the public. Sufficient coal will be stored at the gasification plant site to ensure that plant operations can continue should a break in coal mining occur. Prior to gasification, the raw coal will be processed to ensure a consistent feedstock for the gasifier (Figure 3). It is currently anticipated that processing will include the following steps: • initial crushing to reduce the size of the coal; • preliminary processing to reduce the ash content of the coal and improve its

combustion properties (the nature of which will be defined through coal quality testing); and

• further grinding and drying to provide the optimum size and moisture content for the gasification unit.

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Figure 3: Coal Handling Process

TRUCK DUMP

OVERSIZED REJECTSSTOCKPILE

RAW COAL STOCKPILE

COAL PREPARATIONFEED CONVEYOR

CLEAN COAL STOCKPILE

REJECTS

COAL PREPARATION

RAW COALSCREENS

COARSECOAL

PROCESS

FINE COALPROCESS

FACILITY

GASIFICATIONCOMPLEX

COAL SIZING &REJECT REMOVAL

Based on upcoming coal quality tests, the need for a beneficiation (coal washing) plant will be evaluated. If the inclusion of a beneficiation plant does not offer any significant advantages for the operation of the gasifier, it may not be included in the final Project scope. Following processing, the coal will be stored until it is required by the gasification unit. Coal Gasification Sherritt proposes to build facilities to support a single gasification unit. The gasification unit will include the processing steps required to produce 320 MM scfd of syngas and to further refine it into approximately 270 MM scfd of pipeline grade hydrogen. The key feeds to the gasifier are dried and pulverized coal, oxygen and water/steam. The first step in the proposed gasification process is to expose the coal to steam and carefully controlled amounts of oxygen under high temperatures and pressures in the gasifier. Under these conditions, the coal, oxygen and steam react to produce a mixture of hydrogen, carbon monoxide, and carbon dioxide as well as minor amounts of other gaseous compounds, all collectively referred to as syngas (Figure 4). Next, the syngas is cooled with water (quenched) and scrubbed in order to remove residual particulates (ash) and trace gaseous by-products such as ammonia (NH3).

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The scrubbed syngas is then mixed with additional steam and fed to the shift reactors where the carbon monoxide content is converted to hydrogen and carbon dioxide. The converted syngas, now containing primarily hydrogen and carbon dioxide, is sent to an acid gas removal process to remove the carbon dioxide along with other impurities such as hydrogen sulphide (H2S). The hydrogen sulphide from this step will be converted to elemental sulphur with an estimated production rate of 30 - 150 tonnes of sulphur per day, depending on the gasifier feed mix. In the final processing step, purified hydrogen is produced before being transferred via pipeline to market. A utilities plant will produce the steam to be used in the gasifier and potentially electrical power for consumption within the facility.

Figure 4: Block Flow Diagram for Coal Gasification Process

WATER

COAL FROM MINE

OXYGEN

SYNGASWater

HCN

CO 2 stream Elemental Sulfur

Hydrogen (pipeline grade)

Tail Gas

STEAM

H2S

(H2 + CO2)

STEAM

Inert Solids

Steam Power

FEED STORAGE & HANDLING

1 FEED STORAGE & HANDLING

1

GRINDING& DRYING

3 GRINDING& DRYING

3

QUENCH

GASIFIER (Coal+H2O+O2 → H2,CO , CO2)4 GASIFIER (Coal+H2O+O2 → H2,CO , CO2)4

INERT SOLIDSHANDLING

5 INERT SOLIDSHANDLING

5

SYN. GAS SCRUBBING

6 SYN. GAS SCRUBBING

6

SHIFT REACTORS(CO + H 2 O CO 2 + H2)

8 SHIFT REACTORS(CO + H 2 O CO 2 + H2)

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ACID GASREMOVAL

9 ACID GASREMOVAL

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BLACK WATER

7 BLACK WATER

TREATMENT7

PRESSURE SWINGABSORPTION

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12

UTILITIES

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CLAUSPLANT

10 CLAUSPLANT

10

BENEFICIATION2

BENEFICIATION2 WASTE WATER

TREATMENT13 WASTE WATER

TREATMENT13

OXYGENPLANT

14 OXYGENPLANT

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H2S, NH3, HCN GASES

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Any process waste water will be sent to a waste water treatment plant, treated and to the extent possible, either recycled into the gasification process or re-used in other operations (e.g. dust suppression). No untreated water will be released to the environment. Depending on the final product mix, up to 12,500 tonnes per day of commercial grade carbon dioxide may be produced during the gasification process. The carbon dioxide from the process is highly concentrated and therefore relatively easy to capture. Potential markets for the produced carbon dioxide include use in enhanced oil recovery (EOR) operations. Alternatively, the gas could be sequestered into suitable depleted oil and/or gas fields. The bulk of the ash fraction of the coal feed is melted and converted during the gasification process into an inert coarse solid by-product, which is removed through a solids handling system and trucked to the mine for backfilling in the mined out areas. Alternate uses for the coarse solids are currently being explored, including the potential for use in products such as asphalt for road construction. The gasification facilities are likely to be similar in size and structure to other refining and upgrading complexes in the province. Utilities & Infrastructure The following utilities and infrastructure elements will likely be required to support the Project. Water Supply System Water is required for use in the gasification process and for other service needs within the plant. Water may also be required during coal preparation and for cooling purposes, although the potential use of air cooling systems is also currently being evaluated. The total water demand for the Project will be determined during the Project’s preliminary engineering design phase which is currently underway. Preliminary estimates show a need for between 2.4 and 9.5 million m3 per year, depending on the type of cooling system implemented (air versus water cooling.) There are a number of alternate water sources in the area that could also be used to augment water supply to the gasification complex such as waste water from other industrial or municipal sources. It is currently expected that the bulk of the water required for the Project will come from a source outside of the mine/plant area with the most likely source being the North Saskatchewan River. This would necessitate the construction of a pipeline and a water intake structure from the North Saskatchewan River to the Project. The potential to have a third party construct and operate the water supply system is currently being explored.

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Oxygen Plant Oxygen required for the gasification process will be generated by a separate but integrated oxygen plant. The oxygen plant will require a significant amount of electrical power. Product Pipelines

One or more dedicated product pipelines will be required to deliver the syngas, hydrogen or synthetic natural gas to the market place. Although the number and location of these pipelines has not yet been finalized, Sherritt is targeting industrial customers in the Alberta Industrial Heartland/ Fort Saskatchewan region. A pipeline to carry CO2 either to market or for safe underground storage (sequestration) will also likely be required.

Separate applications for pipeline infrastructure will be required and it is possible that they may be owned and/or operated by third parties on behalf of Sherritt. Power The Project will require electrical power during both construction and operation. It is expected that construction power can be provided through the existing distribution system but this will be determined through future discussions with the Alberta Electric System Operator (AESO). Power demand during the operational phase is currently anticipated to be approximately 150 megawatts. This will require the construction of a new substation and transmission line. The key sources of power demand during the operational phases will include the oxygen plant (75-85 megawatts), the draglines (2.5 – 3.0 megawatts per dragline) and the gasification plant itself. Some power may be generated through on-site cogeneration. Roads Access road development into the plant and mine sites will be required. The location of these roads will be determined once the mine plan has been finalized and the plant site selected. Existing infrastructure in the project area will be utilized as much as possible.

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Rail Facilities Rail facilities may be required to facilitate the movement of equipment to the Project site or for the transportation of supplementary feed stocks to the site. 7.0 Project Schedule The following chart illustrates the proposed schedule for the Project. The schedule reflects submission of the Project application in early 2008 with regulatory approval for the Project anticipated in early to mid 2009. Following Project approval, construction would commence in mid 2009, with the start up of the first gasification unit planned for 2011. Stakeholder consultation will continue throughout the project design and regulatory approval process.

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

SCHEDULE - COAL GASIFICATION PROJECT

2006 2007 2008 2009 2010 2011

Detailed Engineering

Site Preparation

Public Consultation

Procurement and Fabrication

Construction of the First Gasification Unit

Regulatory Review

Feasibility Engineering Study

Application and EIA Preparation

Application Submission Regulatory Decision/Permits IssuedStart Up & Commissioning

The feasibility of the second gasification unit will be investigated once the first unit is operating at its designed capacity (in approximately 2012.) The third and fourth gasification units and corresponding mine expansion would likely be considered in the 2015 to 2020 timeframe depending on market and economic conditions. 8.0 Potential Environmental and Socio-Economic Effects of the Project Environmental Effects

During the planning and design of the Project, Sherritt will assess the potential local, regional and cumulative effects of the Project on the environment. Appropriate measures will be developed to mitigate for these effects. Sherritt has significant experience and documented success with the operation of refinery facilities and with the mining and reclamation of lands within the parkland/prairie regions of Alberta. Sherritt will transfer the benefits of that experience directly to the Project’s operating, conservation and reclamation programs. Potential issues to be evaluated include:

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Air Emissions

The Project will produce some atmospheric emissions, including oxides of sulphur and nitrogen, particulate matter and greenhouse gases such as carbon dioxide. All of these emissions must be controlled in order to meet provincial and federal standards. However, as the gasification process lends itself to the capture of carbon dioxide as well as other impurities (e.g. hydrogen sulphide, ammonia etc.), air emissions are expected to be low and the associated risks to human, animal and plant health are not expected to be a significant issue for the Project.

Water & Wastewater

Both the proposed mine and the gasification process will draw upon local and regional water supplies.

The development of the mine (dewatering, surface drainage etc.) will affect groundwater aquifers and surface water hydrology in the region and the extent of these effects and possible methods for mitigating them will be addressed.

Water is required for the gasification process. Sherritt will identify acceptable source(s) of water for the Project and address any potential effects that water withdrawals may have on the selected source(s).

The Project is expected to create a number of wastewater/effluent streams. No untreated water will be released into the environment. Extensive studies will be conducted as part of the Environmental Impact Assessment (EIA) process to ensure that water impacts of the Project are understood and proactively managed.

Sherritt is sensitive to water use issues in the province, and will work closely with Alberta Environment to obtain the necessary licenses and approvals for the supply and use of water to the Project.

Land Disturbance and Reclamation

The development of the mine and plant site will result in the disturbance of land in the proposed area. Potential effects to existing land uses, soils, vegetation, and wildlife will need to be assessed and appropriate mitigation strategies developed to minimize any potential long term effects.

Sherritt has significant experience and documented success with the reclamation of lands within the parkland/prairie regions of Alberta and will be able to transfer the benefits of that experience directly to the Project’s conservation and reclamation programs.

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Wastes & By-Products

The Project will generate a number of waste or by-product streams including coarse solids from the gasification process, rejects from the coal preparation process and elemental sulphur. While some of these by-products may be suitable for other uses, some may require on-site storage, treatment and/or disposal.

Socio-Economic Effects

Development of a large industrial project such as the Dodds-Roundhill Coal Gasification Project has the potential to create a range of socio-economic effects.

Positive socio-economic effects will include those already discussed in section 2.0 of this document as well as future jobs and continued economic growth for the region.

Sherritt will also consider the following:

• impacts to other land uses (e.g. agriculture, oil & gas); • impacts to existing infrastructure (roads, traffic patterns, utility

corridors, etc.); • local and regional economic impacts; and • quality of life impacts to area residents.

Sherritt will work actively with stakeholders to identify and manage potential socio-economic issues. Sherritt will also work with municipal and provincial authorities and other developers in the region to ensure effective implementation of any proposed mitigation strategies.

9.0 Social and Environmental Responsibility Sherritt’s Commitment Sherritt is committed to a high standard of environmental management and to the health and safety of its employees, contractors and others associated with its operations. Sherritt has in place a company-wide program to ensure regulatory compliance and to manage environment, health and safety issues. The Corporation’s Board of Directors has an environment, health and safety committee which meets on a regular basis. The committee has a mandate to review environment, health and safety policies and programs, oversee the Corporation’s related performance, and monitor current and future regulatory issues.

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Sherritt believes in strong community programs committed to sustainable economic development – working with employees, the local community, all levels of government and society at large to improve the quality of life, in ways that are both good for business and good for development. Community and Stakeholder Engagement Meaningful consultation with the public is an integral part of the Project. Sherritt recognizes the importance of informing and receiving feedback from the local communities, residents and other key stakeholders who may be potentially affected by the Project. This engagement will ensure that all environmental and social issues have been identified, and means for addressing these issues have been investigated. Sherritt is committed to conducting business in a socially responsible manner and will manage upcoming public consultation activities using the following guidelines:

• Sherritt will engage in ongoing, open and co-operative dialogue with any public participant or stakeholder who has a sincere interest in the Project;

• Particular emphasis will be placed on meeting with participants who reside, use or have a specific interest in the Project area and/or adjacent locale. For those groups having interests which are provincial in scope, efforts will be made to seek representatives from local chapters residing within Beaver and Camrose counties;

• Sherritt will work with affected landowners to develop a land acquisition strategy that addresses the concerns of the landowners within the mine permit area;

• Sherritt will consult with the local communities, residents and other potentially affected key stakeholders, including First Nations, Métis and other Aboriginal peoples during all stages of design and development of the Project. Participants will be provided opportunities to view, question and understand the company’s plans and operating practices. Participants input will be one of the criteria used in choosing the preferred development options. Decisions which affect these participants will be clearly identified and explained in the Environmental Impact Assessment (EIA) Report; and

• Sherritt will consult with stakeholders for the life of the Project. This consultation process will be an important source of information with respect to the ongoing effects of the project on landowners, the community and the environment.

Status of the Public Consultation Process To date, Sherritt has held meetings with Beaver County Council, Camrose County Council, the Alberta Energy and Utilities Board, Alberta Environment and other Alberta government representatives to introduce the Project. An open house was held on November 2, 2006 at Round Hill, Alberta for the communities

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of Round Hill, Tofield and Ryley to introduce the Project. Following the release of this Public Disclosure Document, there will be various opportunities for the communities, residents and other stakeholder groups potentially affected by the proposed Project (including First Nations, Métis and other Aboriginal peoples) to obtain information and meet with the company. The Public Consultation process will continue to be adjusted to meet the needs of new groups of stakeholders as they are identified. Environmental and Socio-Economic Impact Assessment Sherritt will be conducting a comprehensive Environmental Impact Assessment (EIA) and Socio-Economic Impact Assessment (SEIA) that will meet the requirements and needs of government regulatory review agencies. It will also allow them to assess the environmental and social impacts associated with development of the Project. The EIA will establish the environmental baseline conditions in the area, assess local and regional impacts, examine project alternatives, evaluate cumulative effects and provide monitoring and management plans to mitigate adverse effects. Preliminary baseline studies will include work on existing surface and groundwater conditions, air quality, wildlife population and habitat inventories, vegetation and soil conditions, aquatic resources, public health, traffic, socio-economic effects and historical resources. Some of the key environmental issues that will be addressed on both a local and regional basis include:

• Incorporation of the existing land uses into the mine plan, reclamation plan and eventual end use plan;

• Control of local impacts such as noise, dust, and traffic; • Successful management of atmospheric emissions, such as oxides of sulphur

(SOx), oxides of nitrogen (NOX) and particulate matter (PM10 and PM2.5); • Effective management of both surface and groundwater resources; • Protection of the surrounding natural and associated wildlife; and • Management of greenhouse gas emissions.

The Proposed Terms of Reference provides an outline of the work to be completed. For further information refer to the Environmental Impact Assessment Report – Proposed Terms of Reference, Sherritt International Corporation Dodds-Roundhill Coal Gasification Project.

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Regulatory Review Process Before development of the project can proceed, Sherritt International Corporation will be required to submit an application to the Government of Alberta for review. This will include submission of the EIA report in accordance with the requirements of the Alberta Environmental Protection and Enhancement Act (EPEA). The Alberta Ministry of Environment (Alberta Environment), with input and assistance from other government departments, will review the Project application and EIA to ensure that the Project supports and promotes the “protection, enhancement and wise use of the environment”. Upon satisfactory completion of the EIA review, an application will be made to Alberta Environment for subsequent EPEA approval. Once the EPEA approval process is complete, Sherritt may be issued construction and operating approvals under EPEA. These approvals will contain environmental requirements relating to emissions, monitoring, reporting, and conservation and reclamation and will cover all aspects of both the mining and gasification process. Application for approval will also be made to the Alberta Energy and Utilities Board (EUB) under the Coal Conservation Act (CCA). The EUB will review the entire Project, including its environmental and social effects and through its regulatory process, critically assess the resource recovery, technology, and environmental and socio-economic impacts of the Project. If the EUB determines that the Project is “in the public interest” it will issue a permit and a series of licenses for the mine, an approval for the beneficiation plant, and an Industrial Development Permit (IDP) for the gasification plant. Sherritt will also apply for Federal authorizations, as required, under the Federal Fisheries Act, Navigable Waters Act and any other relevant Federal legislation. Under the Federal application process, it is also possible that a review under the Canadian Environmental Assessment Act may be required.

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10.0 Contacts For more information about the Project, visit Sherritt’s website at: www.sherritt.com Alternately, you may also contact: Barry Hatt, Senior Vice President Sherritt International Corporation 1133 Yonge Street, Suite 5 Toronto, ON M4T 2Y7 Tel: (416) 924-4551 Kevin Drinkwater Manager, Marketing Sherritt International Corporation Coal Division 1600, 10235 – 101 Street Edmonton, AB T5J 3G1 Tel: (780) 420-5833 kdrinkwater@sherritt.com Pat Garvin Director, Carbon Development Sherritt International Corporation Coal Division 1600, 10235 – 101 Street Edmonton, AB T5J 3G1 Tel: (780) 420-5880 pgarvin@sherritt.com Media/Investor inquiries should be directed to: Michael Minnes VP, Investor Relations and Corporate Affairs Sherritt International Corporation 1133 Yonge Street, Suite 5 Toronto, ON M4T 2Y7 Tel: (416) 935-2468 mminnes@sherritt.com